Ladies and gentlemen, thank you for standing by. Welcome to the AMN Healthcare Third Quarter 2013 Earnings Call. Later, we'll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the conference over to our host, Ms. Amy Chang, Vice President of Investor Relations. Please go ahead.

Thank you, Laurie. Good afternoon, everyone. Welcome to AMN Healthcare’s third quarter 2013 earnings call. A replay of this webcast will be available until November 15, 2013, at amnhealthcare.investorroom.com. Details for the audio replay of the conference call can be found in our earnings press release. Regarding our policy on forward-looking statements, various remarks and characterizations we make during this call about future expectations, projections, plans, prospects, events or circumstances constitute forward-looking statements. Forward-looking statements are identified by words such as believe, anticipate, expect, intend, planned, will, should, would, project, may, variations of such words and other similar expressions. It is possible that our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2012, and our other filings with the SEC, which are publicly available. The results reported in this call may not be indicative of results for future quarters. These statements reflect the company’s current beliefs and are based upon information currently available to it. Developments subsequent to this call may cause these statements to become outdated. The company does not intend however, to update the guidance provided today prior to its next earnings release. This call may also contain certain non-GAAP financial information. We make available additional information regarding non-GAAP financial measures in the earnings release and on the company’s website. On the call today are Susan Salka, our President and Chief Executive Officer; as well as Brian Scott, our Chief Financial Officer. Joining us during the Q&A session will be Ralph Henderson, our President of Healthcare Staffing; and Bob Livonius, our President of Strategic Workforce Solutions. I will now turn the call over to Susan.

Thank you very much, Amy. Good afternoon, Happy Halloween and welcome to AMN Healthcare’s third quarter 2013 earnings conference call. AMN’s leadership position as the innovator in healthcare workforce solutions and staffing services continues to be a differentiator for our clients. As healthcare providers navigate through a climate of weaker census and budgetary pressures, they are seeking trusted partners, who can enable them to create more flexible workforce models, that also help them achieve their patient care and financial goals. In particular, AMN’s strength in providing MSP, RPO and EMR staffing services, coupled with our scale and execution, has enabled the company to deliver strong performance. We continue to make important investments in our people, processes, technology and potential new products and services. These investments are critical to ensure that AMN evolves to meet the changing needs of our current and new clients. Our ability and willingness to make these kinds of investments are a key reason for our #1 market position, and we are committed to leading our industry in client-focused innovation. More on this later, but let’s first talk about our current results. In the third quarter, AMN consolidated revenue grew by 5%, with all business segments delivering year-over-year increases. Gross margin increased by 90 basis points over prior year to 29.4%. We continued to achieve leverage with adjusted EBITDA growing at a rate 3x faster than revenue. Our adjusted EBITDA margin for the quarter was 8.4%, a 70 basis point improvement over the same quarter last year. A key part of our strategy is to continue expanding our leadership position, by aggressively winning and implementing managed services programs. The closer relationships and the higher fill rates we achieve through MSP contracts enables us to grow faster during periods of market expansion and provide some protection during periods…

Thank you, Susan. Good afternoon, everyone. The company’s third quarter and adjusted EBITDA were at the high end of our guidance range, with revenue at $257.1 million, up 5.4% from last year, and 1.2% from last quarter. Our gross margin for the quarter was 29.4%, up 90 basis points from last year and 10 basis points from last quarter. The year-over-year and sequential increase was due mainly to margin improvement in both our Nurse and Allied, and Locum Tenens segments. SG&A in the quarter totaled $55.6 million or 21.6% of revenue, compared to 21.5% in the prior year and prior quarter. The year-over-year increase in SG&A expenses was due primarily to increased employee headcount, commissions and other expenses related to supporting growth in the business. Our third quarter Nurse and Allied segment revenue increased 2.8% from the prior year and 0.5% sequentially to $171 million. Volume of 5,771 average clinicians on assignment was lower by 1.9% year-over-year and 2.6% sequentially. Revenue per day was up 4.8% year-over-year and 2% sequentially, with our average bill rate higher by 1.8% over last year. Nurse and Allied gross margin of 27.4% was higher year-over-year by 90 basis points and sequentially by 20 basis points. The year-over-year improvement was due to lower insurance costs and a favorable business mix shift towards our higher margin service offering, such as RPO. Third quarter Nurse and Allied operating margin of 11.9% was higher by 60 basis points year-over-year, and 10 basis points in the prior quarter, with improvement driven primarily by the higher gross margin. Third quarter Locum Tenens segment revenue of $75.3 million was up 11.3% from prior year, and 3.5% sequentially. An increase in days sales drove the year-over-year increase, with an average bill rate increase of 3.4% year-over-year, offset by a mix shift to…

[Operator Instructions] And our first question is from the line of Tobey Sommer with SunTrust.

Susan, I had a question for you. It seems like we're hearing hospitals are a little bit more -- better able, I should say, to trim staff, if required by circumstances. And I'm wondering if you had examples of a hospital that may have good admissions trends, and are they equally quick to add staff and boost demand for your services, in the event that, that situation arises?

Hi, Tobey. I don’t know that we want to call out a particular client situation, but definitely a trend, and it’s a small one, but one that we're seeing is clients moving towards -- or at least, voicing the desire to move towards lower core staffing levels, so that they can create a more flexible workforce for the future. But because of that, they need to make sure that they have a reliable partner or way to add that staff very quickly. It’s one of the things that makes them hesitant to reduce their core staffing levels from say 90% to 80% or 70%, as they know they'll need those people at some point, so how quickly can they move towards adding them on. And so, we think that's been a driver of the demand for workforce solutions and MSP contracts, because they want to make sure that, not if, but when they need those people, they've got a partner to turn to who has instant access to temporary staff. So again, I don’t know that I can -- I apologize I'm not answering specifically about a client, but definitely hearing more clients talk about that desire to have more flexibility in their workforce.

Okay. And just in terms of the factors influencing your fourth quarter revenue, if you were to parse out the typical sequential decline relating to seasonality versus the changes you've seen in market demand, how do you characterize those?

Sure. And there's actually some good news in this story, because our Locums division, for example, which seasonally always sees a fourth quarter dropoff, and it is expected to again this fourth quarter, has seen a much smaller dropoff. And I think it’s driven by the momentum that they have and the excellent performance that they're delivering. So historically, we might have expected to see more of a 7% to 9% sequential decline in Locums, and as we mentioned in our guidance commentary, we're looking at low-single digits. And I think that has more to do with their great performance and the strength of the market than any seasonal changes that are occurring. Physician Perm Placement is a modest decline, as it typically is. Again, they've had some nice, strong year-over-year growth, so I think they're just moving through that seasonality a little more modestly than usually. And in Nursing, we're actually seeing a sequential uptick in our traditional travel nurse volume from the third to the fourth quarter, and that is a little more than we would typically see. And it speaks to the trend of how our orders declined in the end of the second quarter, early third quarter, and then as I mentioned, have strengthened more from September to October. And so as we look at our volumes, they've also strengthened, which actually October being the biggest gap year-over-year, and that narrowing to where in December, we're currently projecting to be basically flat, year-over-year. EMR was the other factor. We had an exceptionally strong third quarter for EMR. That team has just done a really outstanding job. It was a record quarter for us. The fourth quarter is a very strong, respectable quarter as well, in fact it's above prior year. But because third quarter was so exceptionally strong and you get the normal seasonal falloff in the fourth quarter, that will be coming down. So it might have been more detail than you were asking for, but there's a lot of moving parts in there.

And our next question is from the line of Jeff Silber with BMO Capital Markets.

Susan, in your prepared remarks, when you were talking about some of the trends in the Nurse and Allied business, you talked about a temporary weakness. And I'm just wondering, what gives you the confidence that this is only temporary?

Well, some of it is because of what we've seen in the demand itself, mentioning that orders started to increase. Actually, going back to even July and August, we mentioned on our second quarter call that we were beginning to see our seasonal orders, and that was a good sign, and that trend continued. And in fact from September to October, our orders increased almost 20%. So there's been enough weeks that we would say that it’s more than just a blip, it is probably more of an ongoing trend. Now I'm not suggesting it’s a significant new trajectory, but it’s a positive sign that we've come out of that trough and are moving back to what would be more of a normal trend. I’ll also ask Ralph to jump in, if there's anything else you’d like to add regarding the nature of the demand.

I think a couple of things that are encouraging. First, we know bookings did bottom out in May, kind of June, and then we've seen an upward trend since then as the order counts came back up. And we did see the slight increase on orders overall, Q3 versus Q2. And the trend that Susan already talked about, which is October being up 20% and slightly above prior year, and that’s translating into this December lift in our travel nurse business, to get back to kind of year-over-year or at least flat to prior year growth, by the end of the quarter. Additionally, conversations with our clients have been that the reductions that they've put in place have begun to take a toll, their overtime costs and their burn-up factors go up, and so those conversations tend to lead to higher order counts very shortly thereafter.

Okay, that’s fair. You talked a little bit about the EMR business. I am just curious, I know the third quarter was exceptionally strong. But aren’t most of those projects done? Don’t most of your clients have most of what they need in place, or do we expect a pickup next year in that segment as well?

This is Ralph, I'll handle that one again. I think there's a perception, right, because of the way the act was structured, that people would be done through all their work by the end of 2014. And really it’s not what we're seeing in the pipeline. There’s a couple of factors there. Q3 was super strong. Q4 is actually soft, because it’s not a great time to go live. You have a lot of people out on holidays and vacations and things like that. So we expect Q1 to get back to kind of a normal level of EMRs in the pipeline. Actually, we have opportunities that run clear through 2015 in our current pipeline. So just getting the technology installed and then giving it up to meaningful use, there are several different projects that occur along the way. Additionally, we're seeing some hospitals begin to upgrade technologies that are older, dated, and so we're seeing next-generation things. So while we don’t -- while it probably does have a bit of a spike in it, we don’t see it as something that ever really kind of goes away completely. Very similar to what you see in kind of enterprise software in corporate America. Like Oracle doesn’t really have a downturn.

Sure. Can you give us some sort of order of magnitude how large that business is for you, the EMR business?

In the past, we've talked about it being about $5 million a quarter was our run rate. I think that was on the last call. This quarter, it was a little bit more than double that. It's a little bit hard to segment out exactly the total for that business, because oftentimes, clients just place orders as traditional travel orders that are part of that EMR project. But where it's an identified project, and we're really implementing our full management program, that’s kind of where we get kind of the $5 million run rate number from.

Okay great. If I can just sneak in one more. I'm just wondering if the government shutdown had any impact on your business. If you can just remind us of your exposure to VA and any other government payors?

Sure. Our government, which is primarily in our Locums business, it’s about 12% of our Locums revenue, which is primarily with the VA and military facilities through subcontractors. And we didn’t see any change, because they're still providing care and services, and it wasn’t one of the areas that was particularly affected. And so we didn’t see any softness there or any behavior changes, and it’s very small in our other businesses. Travel nurse, the federal government is something like 1%, and it’s pretty low in Allied and the local staffing as well.

And our next question is from the line of Tim McHugh with William Blair and Company.

I just wanted to ask about the time that the bookings kind of bottomed in May or June. Are you talking about year-over-year, or kind of sequential, the seasonality, how do we think about that?

This is Ralph again. That comment was about travel nursing, I'll make sure. I make sure it’s not about the entire Nurse and Allied Segment, because the Allied segment has been pretty soft throughout. But travel nursing business sequentially bottomed out in kind of May or June, and we've seen a decent upward trend since then.

Seasonally, wouldn't you normally have expected an upward trends? I guess, how does that vary versus -- is it out of the norm?

It's kind of hard to hear you, but I guess you’re basically asking if, seasonally, we’d see a pickup from the second to third quarter. That is a normal -- this is Brian. That is a normal pattern that we would see. And as we talked about it, we'd seen our demand decline on a year-over-year basis, to where it was essentially at or below prior year levels, and it kind of bounced along with that. We've seen that pick back up again, which is a normal seasonal pattern. And during most of the third quarter, we were still kind of running at or below, and more recently though, we've picked back up above prior year levels.

And then one last one, in the Locum Tenens MSP programs, can you talk about the competitors and how willing are they to participate in those programs? And how is that impacting your ability to sell those and implement those programs?

This is Bob. I'm glad you asked the question, actually. Historically what happens is, the larger companies who don’t have an MSP program will be the ones who hold out on becoming an affiliate vendor initially. And then history tends to repeat itself, and eventually they build their own programs. And we expect that to happen here as well. We expect that some of the larger clients. We are proud of the fact that actually over 50% of the, what’s called the NALTO members, National Association of Locum Tenens Organization, over 50% of their members are already affiliate vendors with us, providing services to our Locum’s MSP client. So we have plenty of vendors. Some of the larger clients -- some of the larger vendors would like to hold out as long as they possibly can. We kind of call it the 4 strategies of the four Bs. One is where you sort of bury your head in the sand, that’s one, kind of hope it goes away. Two, you boycott the program, hoping that by boycotting it, and I think that’s what we're seeing with some of the providers, that it'll slow down acceptance. That doesn’t seem to be the case. Third is that you burn bridges with your clients and try to pull out your doctors. That has a pretty negative impact in the long run. And then the final one is to be a good partner, and either be in a vendor in it or to build your own program. So we believe that last strategy will eventually pay off. And just a final point is, I think that the industry itself, people think of it as an industry where there's a lot of small clients, maybe only use 2 or 3 vendors, and maybe they only need 2 or 3 doctors a year, while there's a lot of clients who have somewhere between 10 million, 20 million and 30 million, and in fact, our pipeline in Locum’s right now has doubled. It doubled last quarter, it doubled again this quarter, and represents over 25% of the total pipeline of prospects. So we're very bullish, and we don’t think that is going to have a long term impact.

And our next question is from the line of Josh Vogel with Sidoti & Company.

We saw a nice improvement in bill rates across Nurse and Allied and Locum Tenens. I was just curious, are you gaining any leverage with your clients here, or is this all just a product of the specialty mix like you mentioned?

This is Ralph, I'll handle that again. The bill rate increases we've been able to get really are as a result of other cost pressures that are happening out there, rising housing costs, rising wages and those sorts of things. We're gaining leverage ourselves right, by delaying the increases to the providers for short periods of time, or negotiating better on our insurance and our housing costs. But really, there's not a significant enough shortage that, that's driving our price increases right now.

Okay. I'm sorry if I missed it in your prepared remarks, but the margins improved nicely in Locum Tenens and the operating margin at a level you haven’t seen in years. And were there any onetime items there? Or do you think a 10% margin is sustainable going forward?

Yes, this is Brian. There weren’t any material onetime items in the quarter. The gross margin improvement as I mentioned, was primarily related to bill pay spread improvement. So I think that's definitely our target, is to stay above 10%. I think we will -- it may ebb and flow a little bit as we continue to make investments in that business. We still see opportunity and we want to make sure we grow that sales team to capitalize on those as well. But getting into these ranges was our target all along, and it’s nice to see them getting there. And longer term, we expect to move those margins even higher. You look at Nurse and Allied is closer to 12%, and we don’t see any reason why Locum Tenens can’t be at or above that level.

Okay. And just lastly, can you talk about the acquisition pipeline and your appetite to make any deals? And if so, which markets you would be targeting?

Sure, Josh. We've kind of been saying for the last year or so, as we've been asked this question, if we were going to look at any acquisitions -- of which we admittedly are in a better financial position to do that these days, with our debt coming down to such a low leverage ratio, but we are going to be very opportunistic about it. And we would be first focused on acquisitions that would help to bolster our Workforce Solutions offering, that are going to be most important to our clients. Really helping them to find ways to better manage their total workforce costs, maybe not just temporary, but their total workforce. So they might be in the form of services or technology/services. Second would be if there are certain areas of healthcare professionals that our clients are needing from us, that we either don’t provide today, or maybe we do, but it’s at a fairly small level and we want to bolster our position to be able to do that. And so they would be very targeted and strategic and adding on something that was really going to continue to differentiate us with our clients.

[Operator Instructions] And our next question is from the line of Mark Marcon with Robert W. Baird.

The Locum Tenens progress is pretty impressive. I'm just wondering, you mentioned 15% growth here in the fourth quarter. What are some of the factors that might change that trajectory as we look out towards the next year? I mean, you're clearly gaining as it relates to the MSP side. Are you seeing any sort of offsets to that?

I think we said the mid-teens. So I want to make sure we don’t set a new expectation for it. Which, a little bit less than I guess what you’re -- than a 15%. You're right though, Locum Tenens' MSP program is probably one of the strongest things we have going for us right now. Additionally, we made incremental investments in our advanced practice specialties, which we run in our Locum’s business, which are nurse practitioners, physician assistants, those have grown, and so have the CRNAs which fit into that category. And those investments have paid off pretty well. And we've shifted other resources out of lower performing specialties. And that’s basically created the momentum that we finally got to back above industry growth rates, and the team there has done a great job. If there's any headwind, it would still be in those specialties like radiology and anesthesiology, but they're very small now. So they're not even big enough to hurt us anymore. And then obviously any -- if there was a major change in medicine in some way or technology, that type of stuff, you'd see that coming from miles away. So we don't anticipate anything significant. Another positive going for us is the trend towards hospital employment. And our research shows that hospitals are more significant users of Locum Tenens than a traditional physician practice, because as an employee, they expect a different level of work/life balance than they did as a partner in a practice.

Mark, just the other thing to remember is, we are coming off of some maybe softer comps. In 2011 and 2012, we weren’t performing as well. And so while the market rate of growth is thought to be somewhere more in the 8% to 9% range, and we're looking at something in the teens, we should be performing at that level, because we've got a little bit of catching up to do. Going forward, we would be focused on performing above market rates, but I can’t say it'll be at 15% every quarter either, because we had a little bit of a catchup there.

I appreciate that perspective. But it sounds like you should do maybe a little bit better than the market, just given some of the unique MSP properties that you have.

We certainly believe so, and based on the pipeline of MSPs that we have and the momentum we have right now in the business, I would expect to.

So as that continues, would you expect for the margins on that part of the business actually increase further?

We are targeting that, certainly. As we mentioned, we still have opportunities in pricing. I think there are still some areas within Locums where we are maybe still below market; and our gross margins, while improved significantly, are still somewhat below market, we believe. And our EBITDA margins, we think can be above 12%. So that’s driven by a combination of pricing, gross margin, as well as better SG&A leverage.

Just as a reminder, this is Bob again, we don’t expect our MSP business to be below where the rest of our business is. It is priced as value-added offering, so we do not try to go in at a low rate in order to get the business. So we don’t expect MSP to have a negative impact on margin, and should have a continued positive impact on EBITDA, as it has with the Nursing and the Allied sector.

Great. And then just shifting over to Nurse and Allied. Can you give us a little color in terms of how you think Allied is going to -- is it getting close to bottoming out, or do you think that -- that some of the issues there are still going to be headwinds, as we look out towards next year? And then another element as it relates to Nurse and Allied, can you talk a little bit about how we should think about the comp in the first quarter, just given how strong the flu season was last year?

This is Ralph. First, I'll talk about Allied as a whole. The business itself, it’s the therapy side of the business that’s really down, which is the occupational therapists and physical therapists. In that business, the decline in orders has begun to slow down. And we've heard a few positive things from our rehab clients and skilled nursing clients, about their business shifting more into home health specialty. Which is very good for us, performed very well in filling in home health specialties. And utilization is very high in home health. So those are positives for us. We wait -- they haven’t had their calls yet, so we're looking forward to hearing those over the next few days. But those industries have tended to adjust and they're kind of hitting that cycle. So they're 4 quarters into this kind of recession for their business, and now they're beginning to make adjustments, so that’s good news. The rest of the business is actually performing very well, and it’s helping to offset those declines in the therapy business. And so kind of overall, it’s performing better than the marketplace. And when you continue to, as we talked about before, look into new specialties, which will help us drive incremental growth in the future. Things like case management, managers, or patient care coordinators, who help hospitals become more efficient in how they manage their patient volumes and to slow down readmissions. So we're always looking to adjust our recruiters and our sales teams to go after those higher growth specialties. Probably not quite at the bottom yet on the therapy demand, but narrowing in on that date.

Then how should we think about the flu season last year?

I'm sorry, the second part. The flu season last year I think was particularly strong. We haven’t seen any indication thus far that we'll have the same kind of flu season. Of course, the data didn’t come out for a few weeks because of the shutdown, but the levels seem to be pretty much below prior years of incidents of respiratory illness at hospitals so far.

But since it was in the first quarter last year, I think if you were sitting here in October, no one expected the first quarter uplift that we saw either. And so it’s still hard to tell at this point, what the impact will be, good or not.

Okay. So how much of a boost do you think the first quarter received from the flu season, so that if we were not anticipating a similar flu season, we could make some adjustments for that?

We'll have to go back to our numbers and look at it. I know we talked about that, I think, on our second quarter call, kind of after the dust settled, and it wasn’t a significant number. I think order of magnitude, it gave us a little bit more in local staffing in particular, which is a smaller business for us, and a little bit more in Nursing. And you know, admittedly, it’s hard to parse it out, because we don’t always know for certain why we get the order, and what the uplift was for. They don’t necessarily call them flu orders. So kind of order of magnitude, I think we're looking around the table saying, maybe it was $1 million or $2 million, at the most.

Okay. As I think about the orders picking up on a year-over-year basis in the nurse travel subsegment, just how that -- obviously there's a long lead time between orders and finding and filling and then actually getting the contract started. So I was just trying to think that through. Can you talk a little bit with regards to what you're seeing in terms of fill rates? I mean, obviously you've spent a bit and showing good progress with regards to the technological innovations and the mobile. Are you seeing the fill rates pick up materially? Is there any sign that some of the recent patient census softness may change people’s minds about whether or not they want to go into nurse travel, or what are you seeing there?

This is Ralph again. Our fill rates have been -- they're up on MSP, but they're pretty steady overall. An interesting phenomena, when people are watching their budgets, they sometimes place an order that they don’t really fulfill on. And that of course hurts our fill rate. They changed their mind after they've placed the order and then the order gets shut down and our fill rates. So probably the increases in MSP offset by client behavior, that’s probably right for the times given they're trying to stay within budget and are looking at lower census. But overall, that investment in our digital transformation, our mobile strategy, our visitors are up, gosh, to our website, probably triple what they were. A lot of those are mobile visitors. Our leads, which are candidates who have an interest in a job, that aren’t yet ready to put in application in, are double what they were before. And our applications are also trending up on a year-over-year basis. So they're good investments. When demand is stronger, I think they'll help our fill rate improve quite a bit, and we won’t have kind of that headwind of demand -- or just cautiousness by the hospitals right now.

And are you seeing any sort of behavioral change at all, with regards to just anecdotal information, in terms of the nurses and their willingness to return to travel nursing?

I feel like that issue went away almost a couple of years ago, Mark. It was, right after the recession, a harsh turndown for them. But the recent data, talking to recruiters and talking to nurses who work for us, I don’t think there's as much fear. I think the fact that many healthcare systems have implemented MSP programs and have become more strategic in their use of travel nurses, if anything, helps rebuild that confidence. And we have clients who are looking to not staff up and instead just use flexible labor to meet their census peaks and valleys. But that’s not the kind of things that were having 3 or 4 years ago. It’s just more and more frequent that we have conversations where clients are changing their workforce strategy to include a higher percentage of contingent labor, just for times like these. This is what our industry does. We help them get through a downturn in census. And it hurts us, right, we don’t like that part of it, but it really does help our clients manage those costs without big separation costs, dramatic events, all of that.

We'll go to Tobey Sommer with SunTrust.

Susan, wanted to follow-up on a comment you made earlier. Could you describe what you think the percentage of flexible staff is at your customers currently? And then, based on some of the conversations you're having, where you think that could go?

I don’t know that, that number exists in anybody’s database, because clients aren’t always willing to share the exact breakdown with us, and nor does it exist at an industry level. What we do know is, according to BLS data, the most recent reported numbers would indicate that the penetration of temporary nurses working, is at a fairly low point today, relative to say, 10 years ago. And that we think creates opportunity as more hospitals say, we want to move more towards temporary staff. And there was a bit of a pendulum shift, where they were looking more to and were able to have more permanent kind of fixed costs in their budget, say 3, 4, 5 years ago, and they've realized now, that’s not possible going forward. So we would expect that penetration to go up over time, which coincides exactly with what clients are saying to us, that they want to move towards lower core staff and more flexible staff. So I'm sorry I don’t have an exact number for you, because quite honestly, it doesn’t exist. It’s more anecdotal at this point.

That's fine. If you happen to get one, I'm interested, Susan.

Okay.

Then I just had a quick numerical question, Brian. I know you're not giving '14 guidance, but I thought you might be able to clue us in about what the trend will be in depreciation next year.

Last quarter, we were a little over $1.7 million. I would expect it to go up somewhat. We have talked about our CapEx going up. At some point, that will move our depreciation up a little bit as well. So I think that we would get more into the $2 million range for next year for the quarter, and our amortization, I know you didn't ask what that is, will be pretty similar to 2013. It's going to go down maybe $50,000 a quarter, pretty similar for '14.

Our next question from the line of Vishnu Lekraj with MorningStar.

Yes, question here regarding reimbursements. There's some talk from some payors about obviously beating down reimbursements over the next couple of years, combining this with more of a capitated-type payment system. With providers. Have you heard anything on that front in terms of pressure reimbursements and pricing? In addition to that, how do you view that, along with your MSP program, moving out maybe 1 or 2 more years?

Sure, and that is the way in which we've heard it from our clients, that is generally, the pressures and changing reimbursement structures that they anticipate going forward, cause them to want to really get their arms around their greatest areas of spending, of which workforce is typically about 1/2 of their budget, and at least 1/2 of that is usually nursing specific. So we really think it's driven the appetite for more workforce solutions and MSPs because, it not only gives them greater flexibility, but it gives them better analytics to really understand how, when and where they're hiring workforce, and how they can be more efficient in their utilization. And so we think that’s going to continue to be a positive trend for us.

And then here with the exchanges coming on board, obviously, there was a rocky rollout. It looks like it’s still a full go ahead for the exchange, public exchanges at least. Have you heard anything in terms of demand, increasing demand, increasing census maybe because of that? Or how are your clients and how are you thinking about that for the first and second quarter of next year?

I don’t think we really have -- our clients have been kind of silent on the issue of the exchanges and how they're going to affect their census. I know there's a lot of noise about that right now. But the things that we continue to hear, for 2014 and beyond, is that they need to be prepared for a potential spike and uptick in demand and utilization, and that’s driving more desire to partner with us and others within the industry in things like MSP. And even in RPO, which we mentioned has been a nice growing business for us. There probably has been more identification of need in the physician and advanced practice area. We mentioned that we had nice growth in those areas. And I think some of that is anticipation for continued growth and need of those types of professionals, and we certainly expect that to continue going forward. It’s a little hard to tell exactly how it will affect nursing, but there tends to be a bit of a side effect, where if you are hiring more physicians in advanced practice, you're likely going to need more nurses over time. So we think that, that will also drive some greater demand. But they're not as kind of specific about connecting the dots to the exchanges to needing these professionals. It’s more about the overall effect of the Affordable Care Act. Bob, is there anything that you have?

I was just going to say, we really do like to try to listen to our clients. So we are acutely aware of the fact that the clients are under a lot of pressure with their pricing and the costs and cost structures. In fact, we've got some innovative ideas we're working with, with some of our more innovative clients. And new grads programs, for example, with a couple of clients that are really trying to struggle with how do I get the right workforce at the right cost levels. In fact, early next week, we have about 60 clients or more coming in for our second annual Healthcare Workforce Summit, where really a lot of this is discussed. And we talk about what are the challenges they're having; how is the Affordable Care Act going to impact them; what do they expect happening in their census. And I think that’s one of the benefits of our investment in this thought leadership, is it allows us to kind of create some new solutions that we wouldn’t have otherwise created, and in partnership with our clients. So some of those solutions aren’t really ready for primetime, but we're excited about some of the things that are actually in the drawing board.

And I will turn it back to our speakers for any closing remarks.

Okay. Wonderful. Well, thank you so much for joining us today. We do appreciate your continued support of AMN, and we look forward to updating you on our progress next quarter.

Thank you, ladies and gentlemen. This will conclude our conference call for today. Thank you for participation and for using AT&T Executive Teleconference Service, and you may now disconnect.